Coup a Hit to Thailand’s Auto Industry

An employee works at an assembly line at a manufacturing plant in Rayong province, Thailand, in this May 3, 2012, file photo.
Reuters

BANGKOK – Times are getting tougher for Thailand’s auto industry. The declaration last week of a coup d’etat is fueling concern that auto sales and production in the Southeast Asian nation – which calls itself the Detroit of Southeast Asia – will take another hit.

The latest figures out show Thailand’s auto production in April fell by more than a quarter, while sales declined by more than a third from a year earlier.

Wednesday, Ipsos Business Consulting said it was lowering its full-year estimate for Thailand’s car production. The firm now expects Thailand’s production to drop 16% to 2.1 million cars and the country’s auto industry to shed 35,000 to 45,000 jobs in 2014.

“It seems clear that the industry is going to have to continue to manage costs very carefully to cope with the downturn,” said Colin Kinghorn, head of Southeast Asia for Ipsos. “Much will depend on how quickly confidence returns to the Thai market following the (declaration) of the recent coup.”

Some analysts are more pessimistic. LMC Automotive had previously expected a 16% decline in production for 2014, but plans to lower this estimate in coming weeks because the coup could make consumers pull back even further on spending, according to senior analyst Ammar Master.

“Auto purchases are easy to delay by six months or even a year,” said Mr. Master.

Rising household debt and the end of a government program to encourage first-time car purchases are also to blame for the Thai auto industry’s woes.

Analysts have lowered their sales and production estimates for Thailand’s auto industry multiple times this year, and say it will be extremely difficult, if not impossible, for Thailand to reach its goal of producing 3 million cars by 2017.

The coup could “set the country back 10 years” if it takes years to hold a general election and delays the country’s integration with the rest of the Southeast Asian economic community, according to Marc Spiegel, vice chair of the Joint Foreign Chambers of Commerce in Thailand, which represents 29 chambers of commerce with 8,500 member companies.

“You have all these companies waiting to invest, and the longer this goes on, the higher the probability they’re going to pull that investment,” he said.

Still, if Thailand’s military follows through on its pledge to pay farmers under a rice-subsidy program and restore stability to the government, consumer confidence and spending could pick up, according to Jessada Thongpak, a senior analyst in the Southeast Asia region for IHSIHS Automotive.

That’s largely why Mr. Thongpak, for now, is sticking by his thrice-revised forecast of a nearly 15% decline to 2.09 million cars for Thailand’s auto production in 2014.
Others say they are also hopeful that some semblance of political stability will return to the Southeast Asian nation.

“It’s certainly unfortunate that the state of Thai politics led to a coup, but if the junta puts focus on the economy, it may help reverse the deterioration seen since the political protests started last year,” said Darren Buckley, president of the American Chamber of Commerce in Thailand.